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The Seam begins peanut trading

Ron Smith Farm Press Editorial Staff | Sep 01, 2005

The Seam, an electronic trading company out of Memphis, Tenn., hopes to do for the peanut industry what it has accomplished for cotton over the past four years: improve marketing options for both buyers and sellers through Internet trading.

“The Internet is an effective but challenging marketing tool,” says Phil Burnett, president and CEO of The Seam. Burnett, speaking to the recent Southern Peanut Farmers Federation annual meeting in Panama City, Fla., said electronic trade offers the peanut industry an opportunity to “expand markets, improve relationships between customers and suppliers, and improve the flow of information, including price discovery, within the industry.”

Burnett said many businesses will see decreased costs, fewer problems and fewer mistakes because of less paper in electronic trading. “Buyers and sellers also get access to information faster and they get better data,” he says.

Information is in real time. “We see fewer trade distortions,” Burnett says, “so we get accurate market and price information. It's a faster, more informed marketing option for buyers and sellers.”

Burnett says Internet trading improves global marketing for peanuts. “The industry has new markets to reach,” he says, “and an electronic marketing system brings in customers.”

Aids small firms

He says the service allows even small businesses to reach new prospects with less capital outlay than they face with traditional market expansion activities.

“We proved the concept with cotton over the last four years,” he says. “The Seam is the first on-line, real-time trade service for cotton. It's modeled after Telcot, which has a 25-year history. We turned that regional concept into an international system.”

Four-year record

Burnett says in four years The Seam marketed more than 10 million bales of cotton, representing $2.5 billion.”

The process operates on an offer and bid system. Sellers put products up for sale and buyers either accept posted prices or make counter offers. The Seam maintains a neutral position throughout the process. “We don't have a market position,” Burnett says. “We don't own the commodity. It's a transparent transaction and we guarantee the trade is good.”

“We use technology to make information available to buyers and sellers and improve the flow of goods and services.”

The system works in domestic and international markets with grower-to-business as well as business-to-business opportunities. He says the cotton industry has saved billions of dollars through the system.

“Electronic warehouse receipts are the key to making the system work,” Burnett says. “This year, about 85 percent of the U. S. peanut crop is in the electronic warehouse system through a pilot project.”

Security, he says, is a top priority with firewalls and data encryption in place.

More competitive

“The peanut industry must be more competitive,” says Kevin Brinkley, The Seam vice president. “This service offers the industry an edge in the world market. We're creating a new trading exchange for peanuts.”

Brinkley says a contract with USDA to move program peanuts helps launch the new tool. “We'll help sell USDA peanut stocks and add value to those peanuts. That will reduce government budget outlays. We'll also improve price discovery in the peanut market. We hope to replicate the success we've had with cotton.”

The Seam moved 156,000 bales of CCC cotton since 2003.

Brinkley says the Farm Service Agency and other entities will list peanut stocks available for sale. “Anyone who wants to sell in the system, including producers, can use The Seam,” he says. “Buyers and sellers negotiate a price on a bid/ask system. Trades are cleared electronically and the transaction is guaranteed. The Seam takes a lot of risk out of transactions.”

Brinkley says the service encourages consolidating inventories to attract buyers. “It provides a lot of liquidity in one location. Web information delivery permits equal access to price information, which comes through in strict trade terms in real time.”

The process:

A seller creates an offer and uploads that information to The Seam.

A buyer sees the offer and can either accept the offer or make a bid.

Acceptance of a price equals a sale.

An electronic or paper warehouse receipt goes to The Seam.

The Seam holds that receipt until the seller gets paid.

The Seam gets 75 cents per ton commission from both buyer and seller. “We have no subscription fees,” Brinkley says.